December 15, 2017

India’s tax regulators crack down on major bitcoin exchanges

Beware of bitcoin, India’s central bank warns investors

Nine cryptocurrency exchanges have been inspected, according to the media, in Delhi, Pune, Bengaluru, Hyderabad, and Kochi.

Tax department officials said the operation was conducted under section 133A of the Indian Income Tax Act to determine the identities of digital currency investors, their transactions, the bank accounts used, emails, and other data.

They have reportedly used software tools to capture exchange data, including “cloning and mirror imaging” and identified the accounts of a number of high-net-worth individuals.

“The income tax officials are gathering evidence to establish the identity of investors and traders, the transactions undertaken by them, the identity of counterparties, and the related bank accounts used, among other things,” an income tax official told the PTI.

The regulators said they were also investigating cases from last year when large amounts of “black money” had been laundered using bitcoin during the demonetization process in the country.

Last week, India’s central bank warned “users, holders, and traders” of cryptocurrency related risks. Finance Minister Arun Jaitley said the government does not recognize bitcoin. Authorities even started a so-called ‘Virtual Currency Committee’ in April to research and propose a regulatory framework for cryptocurrencies in the country.

READ MORE: India’s central bank rejects bitcoin other cryptocurrencies as legal tender

Demand for bitcoin is outweighing supply in India, pushing its price in the country up to 20 percent higher than international prices. Statistics show that about 30,000 customers are actively trading at any one time.

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What’s ripple & why is it setting cryptocurrency world on fire?

The world’s fourth most valuable cryptocurrency was trading at 70 cents at 14:40 GMT on Thursday, according to CoinMarketCap data. Ripple has seen its price grow by 10,000 percent since the beginning of the year, when it was trading at just $0.006 per token.

Though the price for ripple is more affordable than its rivals, ripple’s market cap has reached $27 billion, compared to litecoin’s $16 billion trading at $297.83, and IOTA’s $11.5 billion at $4.13. Ripple’s rally dragged litecoin down to fifth among the most valuable cryptocurrencies.

Ripple was launched in 2012 in California and is currently listed on 30 exchanges. The digital currency is closely connected to the banking world, as it was initially designed as a worldwide payment and transmission system. Ripple, the company behind the cryptocurrency, has licensed its blockchain technology to over 100 banks as of October.

Last month, American Express introduced instant blockchain-based payments using ripple for US corporate clients sending funds to UK- based businesses, which bank with the British branch of Santander. At the same time, Michael Arrington’s $100 million cryptocurrency hedge fund will be reportedly valued in ripple’s XRP.

Experts see no apparent reasons for ripple’s recent rally other than positive momentum. The launch of bitcoin futures last weekend pushed the price of bitcoin to new record highs with the rest of the top virtual currencies, including litecoin and ethereum following the leader, as investors began to believe in the potential acceptance of digital assets.

“The launch of bitcoin futures by Cboe Global Markets earlier this week has been seen as a celebrity endorsement and a stamp of approval on crypto. Ripple is very promising … and many people are excited about this particular coin. It is in a powerful position and serves as a payment network allowing you to transfer dozens of different currencies worldwide at lightning speed,” said Standpoint Research’s Ronnie Moas, as quoted by CNBC.

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China about to knock out petrodollar by trading oil in yuan

China’s launch of ‘petro-yuan’ in two months sounds death knell for dollar’s dominance

According to Bloomberg, which cited a statement from the exchange, 149 members of Shanghai International Energy Exchange traded 647,930 lots in the rehearsal with a total value of 268.2 billion yuan. The system met the listing requirements of crude futures after the exercise, it added.

“This contract has the potential to greatly help China’s push for yuan internationalization,” said Yao Wei, chief China economist at Societe Generale in Paris.

She added, however, “its success will hinge critically on the degree of freedom allowed for the capital flows related to the contract.”

A former China division chief at the International Monetary Fund, Eswar Prasad said: “It is not unreasonable to envision a world in which the overwhelming share of commodity contracts, especially for oil, are no longer denominated just in dollars.”

But “the yuan’s role in global finance will ultimately be determined by the degree of commitment of Xi Jinping’s government to economic and financial market reforms.”

Since the 1970s, the global oil trade has almost entirely been conducted in US dollars. The largest energy consumer, China, is interested in having oil contracts in yuan. Beijing plans to introduce its own oil benchmark which will rival Brent or West Texas Intermediate. Analysts say Chinese authorities will need to first convince large oil producers and consumers to use the yuan and invest in the Shanghai benchmark.

The Chinese government announced plans to start a crude oil futures contract priced in yuan and convertible into gold earlier this year. The contract will enable the country’s trading partners to pay with gold or to convert yuan into gold without the necessity to keep money in Chinese assets or turn it into US dollars.

The new benchmark will reportedly allow exporters, such as Russia, Iran or Venezuela to avoid US sanctions by trading oil in yuan.

In September, Venezuela ditched the greenback for oil payments. Caracas has ordered oil traders to convert crude oil contracts into euro and not to pay or be paid in US dollars anymore. The measure followed the rolling out of sanctions by the United States against the country.

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You may be mining cryptocurrencies for fraudsters while watching online videos

The video sites are uploading malicious software onto your computer, which allows the fraudsters to force your PC to create the cryptocurrency monero, Adguard said.

According to the company’s blog, the so-called “crypto-jacking” has reached almost a billion internet users in just two months, and the number is soaring every day.

Hackers can now mine cryptocurrency on your PC, warns Kaspersky

“We came across several very popular websites that secretly use the resources of users’ devices for cryptocurrency mining. According to SimilarWeb, these four sites register 992 million visits monthly,” said Andrey Meshkov, co-founder of Adguard.

In September, Russia’s Kaspersky Lab also reported the problem. In Russia, the company noticed a hacker group, controlling about 9,000 computers. When installed on a victim’s computer, the malware starts using its hardware like graphics cards to create digital tokens. The malware is hard to trace for an ordinary user, who will notice the PC slowing down and heating up, but doesn’t understand why.

“The total monthly earnings from crypto-jacking, taking into account the current monero rate, could be as much as $326,000. These are simply outrageous figures,” Adguard’s Meshkov said.

Pieter Arntz from Malwarebytes has explained why hackers choose monero instead of bitcoin, which is much more expensive. According to the expert, bitcoin mining requires specialized hardware, monero can be mined through home computers.

“Monero mining does not depend on heavily specialized, application-specific integrated circuits (ASICs), but can be done with any CPU or GPU. Without ASICs, it is almost pointless for an ordinary computer to participate in the mining process for bitcoin,” he said.

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Bitcoin’s mysterious creator could become world’s first trillionaire

Cameron Winklevoss (L) and his brother Tyler Winklevoss © Andrew Burton / Getty Images North AmericaZuckerberg’s twin rivals become 1st bitcoin billionaires

With the cryptocurrency’s booming price, the fortune of Nakamoto who is reportedly sitting on $17 billion could turn him into the world’s first trillionaire.

The price of the world’s most valuable digital currency bitcoin is up 1,800 percent this year. Last week, it rocketed above $19,000 for the first time. With a market value of more than $288 billion, the cryptocurrency was trading at $17,254 on Wednesday.

Nakamoto is believed to hold nearly one million bitcoins, and he’s never spent a single coin, according to media reports.

The identity of Satoshi Nakamoto, a pseudonym for the author of the research paper that conceived bitcoin about nine years ago, remains a mystery. To date, nobody knows who Nakamoto is. The name appears on the original document which proposed a peer-to-peer electronic cash system.

There have been at least four people that have been named or have named themselves as Satoshi Nakamoto. Three years ago, Newsweek said a 64-year-old Japanese-American living in California named Dorian Satoshi Nakamoto could be behind bitcoin. He had denied the report.

In 2016, an Australian entrepreneur Craig Wright claimed he was the founder, but that was also called into doubt.

Last month, billionaire Elon Musk denied rumors he was the mysterious inventor of bitcoin. A former intern at Musk’s space company SpaceX has suggested that “Satoshi is probably Elon” because of his deep understanding of economics and cryptography, grip on advanced coding languages, and the fact he is a “polymath.”

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Russia shouldn’t grovel to ‘McDonald’s bas***ds’ – local restaurateur

The American fast-food giant is renting two locations in the center of Moscow for just $165 per square meter a year, according to Teremok CEO Mikhail Goncharov. McDonald’s is saving $6 million per year only in these two restaurants, and there are hundreds of them in Russia, Goncharov wrote in a Facebook post.

‘Not a holy cow’: Russian MP seeks sanitary sanctions on McDonald’s

“McDonald’s is so philanthropical in Russia with this charity clown. Give me a $6 million benefit, I would give money to charity, too,” Goncharov said.

Teremok is one of the largest Russian fast-food chains with more about 300 restaurants in Moscow, St. Petersburg, Krasnodar, and other cities. It also has two restaurants in New York. The first location was opened in 1999 by Goncharov and his partners with $30,000 of savings and a $60,000 loan.

“This is a beastly policy of killing and strangling Russian businesses. And I have to compete with them. Not only is Russian business being snubbed, but they also give preferences to Western networks. We have been forced to switch to white plastic plates and have to listen to our customers about bad service despite high prices. We cook from fresh products, and these McDonald’s bas***ds serve deep-fried food,” he added.

According to Goncharov, despite deteriorating relations between Russia and the US since 2014, McDonald’s has managed to open more restaurants in Russia in the last three years than in the previous 20 years.

In October, Goncharov said Teremok was experiencing problems and could close in one to two years.

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Bitcoin has surpassed Dutch Tulip Mania as biggest bubble ever

According to analysts Howard Wang and Robert Wu from Convoy Investments, the bitcoin price has “gone up over 17 times this year, 64 times over the last three years and superseded that of the Dutch tulip’s climb over the same time frame.”

Their asset bubble chart released a month ago, went viral after showing that among all of the world’s most famous asset bubbles, bitcoin was only lagging the 17th-century tulip bulb mania. The analysts have updated the chart to show the price of the digital currency has more than doubled in just a month. So, as of now, bitcoin has won the global bubble race, finally having surpassed the “Tulips.”

Talking about the main driver of bubbles, Wang said: “When we see a dramatic rise in asset prices, there is often an internal struggle between the two types of investors within us.”

According to the analyst, the first is the value investor, “is this investment getting too expensive?” The second is the momentum investor, “am I missing out on a trend?”

Bitcoin bubble not fatal because value could ‘not be permanently lost’ – expert

“I believe the balance of these two approaches, both within ourselves and across a market, ultimately determines the propensity for bubble-like behavior,” Wang was cited as saying by ZeroHedge.

While the effects of the tulip craze were devastating, bitcoin believers say the cryptocurrency’s rally is far from over and does not mean it is going to collapse, at least anytime soon. Investment guru Michael Novogratz told CNBC that “Bitcoin could easily be at $40,000 at the end of 2018.”

Novogratz, who has invested a quarter of his net worth in cryptocurrencies, added that bitcoin rival ethereum’s price “could be triple where it is as well.”

Talking about the possibilities of a bubble, bitcoin entrepreneur William Mook told RT that could happen but won’t be fatal as the cryptocurrency’s value “could not be permanently lost.”

Tulip mania was a period in the Dutch Golden Age of the 17th Century during which contract prices for some bulbs of the recently introduced and fashionable tulip reached extraordinarily high levels. At the peak of tulip mania some single bulbs sold for more than ten times the annual income of a skilled craftsworker. The prices dramatically collapsed in February 1637.  Tulip bubble is generally considered the first recorded speculative bubble and the term “tulip mania” is now often used metaphorically to refer to any large economic bubble when asset prices deviate from intrinsic values.

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Dollar’s days as world’s most important currency are numbered – Berkeley economics professor

In his book How Global Currencies Work: Past, Present, and Future, he wrote that reserve currences can and do coexist. The book, co-authored by European Central Bank economists Arnaud Mehl and Livia Chițu, was published this month.

The economists used new evidence of central bank reserves from the 1910s to early 1970s, mainly focusing on the interwar period of the 1920s and 1930s. They have challenged the traditional ‘winner-take-all’ view that there can only be one dominant reserve currency at a time.

“In the period between the wars, it seems the British pound and the US dollar shared reserve currency status more or less equally, depending on the year,” said Eichengreen and his colleagues. They found that “before the First World War, even though sterling was the most important currency, the French franc and German mark were internationally significant, too.”

Bitcoin crushing US dollar governments can do nothing to stop it – Max Keiser

According to the economists, “From this vantage point, it is the second half of the 20th century that is the anomaly, when an absence of alternatives allowed the dollar to come closer to monopolizing this international currency role.”

Eichengreen, who’s an economics professor at the University of California, Berkeley, said the dollar’s days as the dominant reserve currency will end “sooner rather than later” and the speed of the shift might depend on the actions of US President Donald Trump.

He said some experts suggest the Chinese yuan is destined to lead in the future.

“The traditional view is that international currency status is a winner-take-all game, that there’s room on the global stage for only one true international currency. The argument was that network effects are so strong they create a natural monopoly because it pays to use the same currency in cross-border transactions that everybody else has used,” Eichengreen told the Quartz.

However, the “new view is that financial technology has moved on and network effects are no longer so strong.”

“It’s easier to switch between currencies. It’s similar to how operating systems for personal electronics have transformed. Everyone doesn’t have to use Windows anymore,” said the economist.

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People taking out mortgages to buy bitcoin

Bitcoin surges to $17,000 after start of futures trading

“We’ve seen mortgages being taken out to buy bitcoin… People do credit cards, equity lines,” he told CNBC.

The president of the North American Securities Administrators Association (the oldest investor protection organization in the world), Borg said: “This is not something a guy who’s making $100,000 a year, who’s got a mortgage and two kids in college, ought to be invested in.”

According to the regulator, we’re “on this mania curve. At some point in time, there’s got to be a leveling off. Cryptocurrency is here to stay. The blockchain is here to stay. Whether it is bitcoin or not, I don’t know.”

He also says futures contracts do not legitimize the digital currency. On Sunday, bitcoin futures debuted on the regulated Cboe exchange under the XBT ticker symbol. The first exchange in the US to trade bitcoin futures, Cboe, is expected to be followed by another Chicago-based stock market CME on December 18. The NASDAQ is planning to launch bitcoin futures next year.

Borg is also director of the Alabama Securities Commission and said futures contracts are regulated, but bitcoin itself is not because innovation and technology always outrun regulation.

“As [technology] continues to accelerate and continues to increase, regulators have got to understand what it is that the innovation’s coming up with, and we’re still trying to get educated,” he said.

“We’re looking at it from a money transmission point of view, but that doesn’t cover the entire bitcoin space.”

Bitcoin started the year below $1,000 and was trading near $17,000 per token on Tuesday.

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US military operations overseas lead resurgence of global arms sales

The research revealed last year marked the end of five consecutive years of decline with a 1.9 percent rise in the sale of arms globally. The number represents an increase of 38 percent since 2002. The SIPRI report covers the top 100 companies manufacturing weapons and offering military services.

“The growth in arms sales was expected and is driven by the implementation of new national major weapons programs, ongoing military operations in several countries and persistent regional tensions that are leading to increased demand for weapons,” the report states.

US arms manufacturers were ranked number one on the list with sales by 38 American firms totaling $217.2 billion, marking a four percent rise compared to 2015. “US military operations overseas, as well as acquisitions of large weapon systems by other countries, have driven this rise,” the report says.

Total arms sales by Western European companies remained stable at $91.6 billion in 2016. It was up 0.2 percent from the previous year. However, the think tank highlights clear divergences among the largest arms-producing European countries.

“There were overall decreases in the arms sales of Trans-European, French and Italian companies, while companies in the UK and Germany recorded overall increases,” according to the report.

The sale of weapons by Russian manufacturers grew by 3.8 percent, amounting to $26.6 billion in 2016. Russian companies accounted for 7.1 percent of the overall total.

“The trends in arms sales are mixed: five companies recorded sales growth, while the other five showed decreases. The highest ranked Russian company is United Aircraft Corporation, which is placed 13th. Its arms sales grew by 15.6 percent compared with 2015 due to increased deliveries to the Russian armed forces and higher export volumes,” the report highlights.

The Oslo-based institute says South Korean corporations showed a 20.6 percent boost in arms sales, totaling $8.4 billion. “Continuing and rising threat perceptions drive South Korea’s acquisitions of military equipment, and it is increasingly turning to its own arms industry to supply its demand for weapons. At the same time, South Korea is aiming to realize its goal of becoming a major arms exporter,” said SIPRI Senior Researcher Siemon Wezeman.

The combined arms sales of companies in Australia, Israel, Japan, Poland, Singapore, and Ukraine fell by 1.2 percent in 2016, largely dragged down by an overall drop in the arms sales of Japanese firms. “Japan’s largest arms companies experienced sharp falls in 2016: Mitsubishi Heavy Industries’ arms sales decreased by 4.8 percent, while those of Kawasaki Heavy Industries and Mitsubishi Electric Corporation declined by 16.3 and 29.2 percent respectively,” SIPRI added.

The report does not include Chinese companies, due to a lack of data on weapons sales.

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